Real Estate

Blackstone cashes out on Invitation Homes

Sells off remaining shares in single-family rental operator for $1.7 billion

Blackstone’s bet on the single-family rental market is now complete, as it was revealed this week that Blackstone is selling off its remaining shares in Invitation Homes for more than $1.7 billion.

In the early part of this decade, Blackstone began pouring money into distressed residential real estate, spending billions to buy up foreclosures and other distressed properties, then turning those houses into single-family rental properties.

Blackstone’s move into single-family rentals was conducted through Invitation Homes, which the firm helped grow into one of the nation’s largest single-family rental operators.

Blackstone eventually took Invitation Homes public in 2017, with its initial stock sale raising more than $1.5 billion.

Then, earlier this year, Blackstone began selling off part of its investment in Invitation Homes.

Back in May, Invitation Homes announced that Blackstone was offering 40 million shares of Invitation Homes stock for sale. The company priced that share offering at $25.30 per share, meaning that selling off 40 million shares at that price would bring in approximately $1.012 billion for Blackstone.

And this week, Invitation Homes announced another stock sale consisting of 57.6 million shares, all of which belong to Blackstone.

The company later priced the share offering at $30.10 per share, slightly above its current trading price of just below $30.

Selling off 57.6 million shares at $30.10 per share would bring in approximately $1.73 billion for Blackstone.

Invitation Homes said that the company is not offering any shares of common stock and will not receive any proceeds from the sale.

According to Invitation Homes, the stock sale will close out Blackstone’s investment of the company.

Blackstone currently owns 57.9 million shares of Invitation Homes, but plans to distribute 300,452 shares “to its partners.”

After that is done, Blackstone “will no longer beneficially own shares” in Invitation Homes, the company said.

Initiation Homes has grown significantly since Blackstone took the company public in 2017. Later that year, Invitation Homes merged with another of the single-family rental industry’s big players, Starwood Waypoint Homes.

Just before Invitation Homes announced that Blackstone was selling off its shares, Blackstone posted an article to its website that addressed its investment in single-family rentals and attempted to clear up “false, misleading claims about Invitation Homes’ business and practices.”

Over the last few years, Invitation Homes and Blackstone have been accused of providing sub-standard living experiences, excessive rent increases, and other questionable business practices.

Blackstone’s article, entitled “Correcting the Record on Blackstone and Invitation Homes,” sought to address those complaints mere days before the company stood to bring in north of $1.7 billion from the stock sale.

“We are proud of Invitation Homes and the positive impact it has had on local communities,” Blackstone said in the article. “The $10 billion invested to acquire these homes and subsequent $2 billion invested in upfront renovations to improve them (many of which were sitting vacant or in disrepair) stabilized local housing markets, spurred economic growth and created jobs in communities in the wake of the financial crisis.”

In the article, Blackstone addresses complaints against Invitation Homes, including claims that Blackstone “profited” off of the housing crisis.

“Blackstone did not own any single-family homes before the crisis and didn’t foreclose on any of the properties Invitation Homes purchased,” the company wrote. “The company began purchasing homes in 2012 – many of which were sitting vacant or in disrepair, dragging down property values for surrounding homes since the financial crisis.”

The company also claims that Invitation Homes is not “driving up rents” in the markets in which it operates.

“Invitation Homes has virtually no ability to impact broader rent trends in its communities. Invitation Homes is a tiny part of the market and operates in some of the most competitive housing markets in the country, and it must follow market prices or no one would rent from them,” the company wrote. “Indeed, Invitation Homes charges rents in line with the broader market – otherwise it wouldn’t have such high levels of occupancy (96%).”

The company also addressed the “myth” that Invitation Homes is “crowding out” first-time homebuyers.

“The properties Invitation Homes bought required substantial rehabilitation and capital expenditure (approximately $22,000 per home). This is not the same market as that for first-time homebuyers, who typically do not want to take on a home that requires such significant repairs,” the company wrote. “What’s more, the notion that a company that represents less than 0.1 percent of the single-family homes in America is having a significant impact on this market is not based in fact.”

With those protestations stated, Blackstone’s Invitation Homes’ stock sale is expected to close on Nov. 26, 2019.

Invitation Homes currently owns more than 80,000 single-family rentals in 17 markets in the U.S.

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